Clarksons Securities has revealed how the world’s biggest new mine project could send demand for capesize bulkers skyrocketing next year.
The Simandou mining venture in Guinea is moving towards first production in 2025.
Capesize owners have already placed a greater emphasis on it during their first-quarter financial reports.
Simandou is divided into two mines controlled by two joint ventures.
The first is the Simfer alliance, 53% owned by British-Australian miner Rio Tinto and various Chinese companies. The second, WCS, is solely controlled by Chinese interests.
Rio Tinto expects a 30-month ramp-up period before reaching an annual production capacity of 60m tonnes of iron ore. There is the potential to scale this up.
Assuming similar developments in the other mine, total production capacity could reach 120m tonnes by 2028.
Clarksons Securities estimates effective annual production at 110m tonnes.
“Given the strong Chinese ownership interests in both mines, it is reasonable to assume that the majority of the tonnes from Simandou could be heading to China over a distance of 11,000 nautical miles [24,700 km],” analysts led by Frode Morkedal said.
This is similar to the distance from Brazil to China.
Orderbook more than covered
“When accounting for additional loading time due to transshipment used in the area, we believe the project has the potential to tie up 170 capesize vessels annually at full capacity by 2028,” the investment bank added.
That more than covers the current orderbook of 116 capesize vessels.
In April, the government of Guinea announced that Simandou’s shareholders had signed a $15bn financing agreement for the project, which adds about 5% to the world’s iron ore reserves.
